A trust is More than Just Death Planning; It’s Life Planning as well
Like most estate planning law firms, we deal with a lot of clients that need revocable trusts. They obviously want to be able to protect their heirs and their assets and utilize the trust structure to best meet those needs. However, some clients are using trusts during their lifetime as well. As we see an aging population, a trust is able to be implemented with the amount of flexibility that is needed to meet the person’s needs during their life. This includes health problems that are not necessarily end-of-life problems. A great example is a heart attack where someone is disabled for several months, but is then able to become fully functional again.
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Life After Your Death? Here’s Why You Should Have a Trust
Everyone needs a will, but, increasingly, estate planners say people also could benefit from setting up a trust while they are alive. That step would help assure that their assets are distributed more quickly, their bills paid promptly and continuously and personal information about property and other assets be kept out of the public eye.
Gerard F. Joyce Jr., CreditFiduciary Trust Company International
Trusts have often been thought of as vehicles for wealthy people to dispose of their businesses, art work and other high-value items. But estate planners like Gerard F. Joyce Jr. of Fiduciary Trust Company International, the private wealth division of Franklin Templeton Investments, say certain types of trusts can be useful for those who are not ultrawealthy.
One of those is a revocable trust, which can be changed in a person’s lifetime. “It is the workhorse of modern estate planning,” said Mr. Joyce, who is also a lawyer. “A properly funded revocable trust can avoid the need for a public probate court proceeding after death that can take time and keep money from being immediately available.”
And “a trust makes sure that bills are paid during the person’s lifetime even when the person is incapacitated,” he said.
The number of people who may lack the capacity to control their own affairs is growing because people are living longer and the number of individuals who have dementia or Alzheimer’s is rising, added Stacy K. Mullaney, chief fiduciary officer of Fiduciary Trust Company, a Boston-based wealth management company that shares a similar name but is an independent entity.
“We are seeing more situations where people need this assistance,” said Ms. Mullaney. Currently, 5.5 million Americans are estimated to have Alzheimer’s, and the disease is the fifth-leading cause of death for adults aged 65 and over, according to the Centers for Disease Control.
“If assets that have been titled in one name are retitled in the name of the trust, the bills keep being paid without interruption in the person’s lifetime,” said Ms. Mullaney, who is also a lawyer.
And that can apply to any situation where financial support is given to family members, she added.
“Many grandparents, for example, pay for the college education of their grandchildren, but an incapacity can interrupt that. A trust would make sure that the tuition is paid.”
Unlike an irrevocable trust, where assets are dispersed with a greater permanency, a revocable trust can be altered during the holder’s lifetime if he or she decides to handle their assets differently. If a person’s financial situation changes, or realizes he or she has simply made a mistake, the individual can close the trust and void the arrangement.
The trust “really does almost everything a will does, but it is more of a private document, and it is not subject to outsider review or approval,” Mr. Joyce said. A will, he noted, can need approval from a court, and changes typically involve additional court scrutiny. Each state has its own laws and rules.
There can be catches to trusts, however. The trust is controlled by the person who sets it up, and often the person will choose one or more co-trustees to help manage the trust. That choice is where things can get tricky.
Choosing a trustee is not just about someone you trust. Knowing how to invest is a key skill for a trustee, estate planners agree.
“Probably the most important decision in picking a trustee is the ability to invest over the long term,” Mr. Joyce said. “It’s common to have a surviving spouse or a child, but it needs to be someone with the time and inclination to do that well.”
While irrevocable trusts are often used for tax planning, Ms. Mullaney said, “revocable trusts are really about life planning.”
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